Flex Your 401(k): Maximize Your Contributions

The Pension Protection Act of 2006 also made it easier for companies to automatically enroll employees in their 401(k) plans, increase their savings over time and put their assets in suitable long-term investments. That means more workers are likely to participate in their plans, and those who do are likely to grow their retirement savings faster than they would in a low-yielding money market fund, the typical default option.

A recent survey of 146 large U.S. companies by Hewitt Associates, a human resources consulting firm, indicates that more than half of them plan to automatically enroll employees in 401(k) plans by the end of the year. And almost one-fifth of companies that already offer automatic enrollment plan to increase the default contribution rate, while more than two-fifths plan to change the default option to either balanced funds, which combine stocks and bonds; life-cycle funds based on a worker's target retirement date; or managed accounts.

Still, you're unlikely to maximize your retirement savings by relying on your employer to enroll you.

Watch for three more steps to fixing your 401(k) in the next few days.